According to pension advisers, new enforcement forces that allow UK pension watchdogs to seek imprisonment if corporate activity damages the retirement system at work are beginning to influence transactions.
At least one transaction has collapsed since the new criminal offense in October, according to a Financial Times survey of six of the largest pension consultants offering advice on mergers and acquisitions.
Potential buyers are also becoming more vigilant against companies that have a defined benefit (DB) scheme on the hook for employers to fund their pension commitments.
John Harvey, a partner at actuarial consultancy Aon, said: “Negotiations have progressed. Pension concerns have played a major role in the decision to withdraw from the transaction.”
The findings provide the first insight into the impact of the new authority of pension regulators designed to provide better protection to members of the pension system. Watchdog may seek criminal sanctions, including imprisonment and unlimited fines, for anyone engaged in activities that seriously damage the financing of the DB pension scheme.
Penalties followed a series of corporate pension scandals, including former high-street retailer BHS and outsourcing group Carillion. There, the retirement savings of tens of thousands of members were endangered due to lack of funds. Plans when these businesses collapse.
Stephen Postill, senior director of Willis Towers Watson, said the new rules seem to have a particular impact on private equity trading, which is usually highly utilized.
“There is certainly tension in the deal,” Postill said. “Early, I think the new rules will make it difficult to sell a company if there is a substantive pension plan,” he added. “
Charles Cowling, Mercer’s chief actuary, said new forces are delaying business operations due to the “additional conversation and legal advice” currently needed.
“The new higher standards have created considerable tension expressed by both trustees and employers about the potential for these new powers to cause fines and prosecutions,” Cowling said. “It’s slowing down the process because employers have to pay more attention to ensure it. [pension scheme] The trustee will be informed of any corporate activities that may affect the strength of the contract. “
XPS Annuity said some companies considering acquisitions “don’t want to approach” businesses that take advantage of the DB annuity scheme because of future regulatory risks. Robert Wallace, XPS Corporate Advisor, said: “The risk of imprisonment may be small, but it is not something that some buyers are willing to undertake in a transaction.”
Pension regulators said: “We do not intend to prosecute what we consider to be normal commercial activity, but suggest that someone be a more serious example of deliberate or reckless acts that endanger a member’s savings. If so, we do not hesitate to use the power needed to protect our members and the Pension Protection Fund. “
The UK Private Equity & Venture Capital Association states that its members “take seriously the responsibility of the pension system” and its code of conduct is “expected to work for the benefit of the companies they support.” I made it clear.
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A new force in the UK pension watchdog closes a deal
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